Wednesday, August 10, 2022

Botswana’s GDP grows by 10.7 percent

Bank of Botswana governor, Linah Mohohlo, has said that the economy has realized growth of an estimated 10.7 percent gross domestic product (GDP) in 2010 after contracting by an estimated 3.7 percent in 2009.

Global GDP growth is expected to ease slightly by 60 basis points to 4.4 percent but the pace of economic recovery, according to her, will be mixed across countries.

The governor has said that growth prospects for developed economies remain generally lower, and concerns about the sustainability of public debt will lead to policy emphasis on fiscal consolidation. Economic recovery will also be constrained by subdued private domestic demand, high unemployment rates and slow improvement in household incomes according to the bank.

The bank says the high debt levels will restrain further fiscal stimuli. “…There is limited scope for monetary policy loosening to encourage more spending due to the near-zero tolerance interest rate levels in many developed countries,” Mohohlo said.

According to her, for emerging market economies, the focus will be on economic stabilisation to stem economic overheating and asset price bubbles arising from excessive exchange rate appreciation that is associated with capital inflows.

The governor disclosed that in the 12 months to September 2010 mining activity rose by a remarkable 21.7 percent following a slump in the demand for diamonds owing to the global economic crisis.
“Although estimates for the fourth quarter are not yet available, indications are that the growth rate continued to be robust, as it would have benefited from higher diamond prices. Even though fiscal consolidation had dampening effect, non-mining GDP expanded by a healthy 6.3 percent,” said Mohohlo.

The governor said overall expenditure, excluding net lending, is expected to grow by 4.6 percent in fiscal year 2010/11. This is about half of the 9.6 percent increase in the previous fiscal year. Recurrent spending is expected to grow by 11.5 percent.

According to the governor, other demand indicators also slowed down in 2010. The bank says consumer spending was constrained by the increase in value added tax and the continued civil service salary freeze. Overall credit increased by 11.9 percent of which lending to households increased by 13.1 percent and 10.5 percent for business.

The governor said global and domestic economic developments were as projected in the 2010 Monetary Policy Statement. “In view of the low demand pressures on inflation, continued economic recovery and a positive medium term inflation outlook, the Bank Rate was reduced by 50 basis points to 9.5 percent, and excess liquidity was appropriately absorbed. The corresponding lower commercial bank lending interest rates supported continued economic recovery at a time of reduced fiscal stimulus,” said Mohohlo.

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